How should members’ respond to the Treasury consultation to remedy McCloud?

Last updated: 01 Oct 2020

We welcome the publishing of this consultation as an important step towards members’ benefits being leveled up in accordance with the judgement. We have consistently argued the need for members to be able to make an informed choice as part of the legal remedy and for that choice to be given to all who have potentially suffered a detriment because of the discrimination.

This includes members who were not covered by the ‘protections’ as well as those who were. We will assess the remedy against our three tests, which are; scheme members get a properly informed choice, full clarity is provided on the tax implications of this choice, and anyone who has been disadvantaged must have that rectified by the remedy. These are not controversial demands and it is hard to see a situation where any remedy can be fair if it does not meet them.

We also welcome confirmation that at the end of the remedy period the government does not intend to unpick the public sector pension arrangements negotiated in 2012, and upon which we were given a 25 year guarantee of no detrimental changes.

The consultation outlines proposals for all members to be enrolled into the 2015 schemes from 1 April 2022. The proposed remedy period is therefore from 1 April 2015 up to 31 March 2022 and applies to individuals who’ve been an active member of a public sector pension scheme during this period if they joined prior to 1 April 2012.

There are two broad options outlined in the proposal:

  • An immediate choice, which would be an election that members would make in 2022 to decide how they wish their service in the remedy period to be treated.
  • A deferred choice underpin, which would see the members make a decision at retirement.

In very simple terms an immediate choice would mean a one-time options exercise would take place, where members would elect which scheme they wish to be treated as being a member of for the remedy period. The deferred choice underpin would see members make that choice at retirement. In some cases this may be a very straightforward decision.

Prospect’s consultation response

We believe the remedy should allow for members to make an informed decision and not be in a position of detriment under any circumstances. Therefore the Deferred Choice Underpin should be adopted as this would allow members to make an informed decision and ensure there is no detriment.

We will also be arguing that members should not be required to pay interest on interest owed to schemes because this is owed due to no fault of their own. Lastly, we will argue that the defaults the consultation discusses should be set by each scheme advisory board instead of the same position between legacy and reformed schemes being adopted across the board.

Prospect members can read our full submission to the consultation here.